A Dose of Energy Reality

1. Tyson Foods is turning food grease and chicken fat into diesel, but Tyson executives issue the same warning that every other renewable-energy advocate issues: It won’t survive without tax breaks. WSJ reports (emphasis mine): “Agricultural giant Tyson Foods Inc. and fuel developer Syntroleum Corp. will announce Monday that they have successfully opened a plant that makes diesel from chicken fat and leftover food grease. But they say their new venture won’t survive unless Congress gives them a hefty tax break, an argument that many other alternative energy projects are also making. The Louisiana refinery has the capacity to produce 75 million gallons of fat-based fuel annually — making it tiny by oil-industry standards but among the bigger alternative-fuel plants in the U.S. Buyers include oil companies mandated by federal law to mix renewable fuel into their conventional diesel, the companies say. . . . The companies contend that the fuel won’t be economically viable unless Congress restores a $1-a-gallon federal tax credit that used to go to companies that mixed alternative fuels into petroleum-based diesel. That break expired at the end of last year, when the $170 million Louisiana plant was under construction. Had Syntroleum known Congress would let the break lapse, the company probably wouldn’t have built the plant, said Jeff Bigger, a company senior vice president. Jeff Webster, a Tyson group vice president, said that if the tax break isn’t extended, ‘The whole green-fuels industry in the U.S. is going to go down.’ The alternative-diesel credit is among several tax breaks that have lapsed or will soon do so. The Obama administration and Congress will be discussing in coming weeks whether to continue the breaks amid concerns over the federal deficit. Similarly, a 45-cent-a-gallon tax break for companies that blend ethanol into gasoline is due to expire at the end of this year. Makers of the corn-based fuel are lobbying Congress to extend it. Several U.S. biodiesel plants have shut down recently, some citing the expiration of the $1-a-gallon tax credit for alternative diesel. Biodiesel — made from grease or oil mixed with chemicals in vats — was all the rage a few years ago, when the tax break existed.”

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Don’t get me wrong, I’m all for reducing everyone’s tax burden, because the government needs nowhere near the monies it rakes in to do the few things it’s truly there for. So, cut taxes. Just do so even handedly. Don’t play tax favoritism with favored fuel sources (i.e. not fossil fuels), and don’t arbitrarily mandate that certain levels of such fuels be used by energy producers.

2. New York Timesreports (again, emphasis mine) : “Even as many politicians, environmentalists and consumers want renewable energy and reduced dependence on fossil fuels, a growing number of projects are being canceled or delayed because governments are unwilling to add even small amounts to consumers’ electricity bills. Deals to buy renewable power have been scuttled or slowed in states including Florida , Idaho and Kentucky as well as Virginia . By the end of the third quarter, year-to-date installations of new wind power dropped 72 percent from 2009 levels, according to the American Wind Energy Association, a trade group. . . . Companies that make solar cells and wind machines argue that a national energy policy is needed to guarantee them a market that will allow their industry to develop. Clean power will be an important industry globally for years, they say, and if the United States does not subsidize renewable energy now, it risks falling far behind other countries. . . . Renewable energy supporters argue that higher fossil fuel prices will eventually make renewable energy more competitive.”

3. Oil demand isn’t on the decline (neither are massive oil discoveries for that matter). Just ask China, which is stocking up: “China is displaying some Olympic-size oil demand of late. A swell of new car owners and double-digit percentage economic growth is spurring oil consumption across the country, and refineries are having trouble keeping up. …the rise in China’s oil demand, which took off more than five years ago, shows no signs of slowing. In September, China imported a record 5.7 million barrels a day of crude, up 24% from year-earlier levels.” As my good friend Robert Bryce says, if oil didn’t exist, we’d have to invent it.

I could go on, but you get the point: Conventional fuels can and will continue to power us. It’s that simple. Maybe one day grasses and pond scum and chicken grease will save the day, but do not expect it anytime soon — at least not without your tax dollars greasing the skids. I am all for finding new and better ways to turn on the lights and move us along the highway but only if those things do so because they make economic sense, because consumers want them on their merits, and because they aren’t increasing the financial burden on taxpayers.

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